Economic Outlook: Romney in a China shop

The cynics will be out in force Friday following the U.S. Federal Reserve decision to begin buying bonds again.

Among the first of the naysayers was Romney for President Policy Director Lanhee Chen, who offered a damned-if-you-do-damned-if-you-don't assessment of the Fed's move, saying it only proved the economy was still in trouble.

From now until November, it turns out that any proposal to fix X,Y or Z will only be taken as more evidence that something is wrong.

"A third round of quantitative easing is further confirmation that President Obama's policies have not worked," Chen said.

OK, now that the rhetoric portion of the statement is out of the way, what's next?

So, what's left after the rhetoric is more rhetoric. Note to self: Beware of anyone who announces he is going to "enact" something.

In the same news cycle, Romney criticized President Obama's strategy dealing with China's protectionist policies with Romney flat out declaring he would name China a currency manipulator "on the first day" in the Oval Office.

Scary version: He is not kidding. If Romney can alienate half of London during his Olympic Summer Games visit, just imagine what he can do in his first day as president.

The trouble with a trade war with China is that it could end up like a game of poker in which the better hand has nothing to do with winning or losing. The winner here will be the player with the deepest pockets -- the player who can withstand the losses longer or outflank an opponent with wealth.

Treating China as the enemy is a touch shortsighted. The true enemy is outsourcing, not China, specifically.

To combat outsourcing, the United States needs to create a far-reaching set of policies that covers such items as intellectual property protection and development of raw materials, like rare minerals, domestically.

Larger problems than currency manipulation keep the international playing field tilted, such as the discrepancy in tax, environment and labor laws between the United States and countries with emerging economies.

It is a luxury, for example, to have laws restricting oil drilling in circumstances in which other nations might give oil companies a green light.

To hurt China where it counts, declaring the country a currency manipulator is certainly a quick way to cover a lot of ground. Unfortunately, it could slow economic progress in China -- and that's different than slowing economic growth, although the two go hand in hand.

Obama's call for a "level playing field" with China is more than rhetoric; It's an admission that dealing with China is far more complicated than it might first appear and long-term goals need to be enhanced by short-term goals, not derailed by them.

In international markets the Nikkei 225 index in Japan rose 1.83 percent while the Shanghai composite index in China gained 0.64 percent. The Hang Seng index in Hong Kong added 2.9 percent while the Sensex in India gained 2.46 percent.

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